Caribbean Property & Investment Review — Edition 176 | December 2011

Publication Date: 3 December 2011  |  Coverage Period: 3 November – 2 December 2011

Morning Briefing

• The Holness administration in Jamaica moves through its first full month in office, with the Prime Minister signalling his intention to pursue fiscal discipline and to engage with the International Monetary Fund on a new framework agreement.
• European markets remain deeply unsettled as Italy and Spain face surging bond yields, and new governments are installed in Athens and Rome, deepening the sense of political flux across the continent.
• Caribbean hotels and resorts report that the 2011-12 winter season is off to a solid start, with North American advance bookings holding up well despite broader economic anxiety.
• The Dominican Republic announces approval for several new resort developments on the north coast, reflecting continued confidence in the country’s tourism infrastructure pipeline.
• Barbados introduces new incentive measures aimed at attracting long-stay visitors and remote workers, a sign that Caribbean destinations are adapting their offerings to a changing global workforce.
• The Eastern Caribbean Currency Authority maintains the region’s fixed exchange rate peg to the US dollar, providing a measure of monetary stability that continues to underpin investor confidence in the OECS bloc.

Jamaica: Holness Government Settles In, Election Approaches

Andrew Holness has moved rapidly to establish the credentials of his government since his swearing-in in late October. In the weeks since taking office, the Prime Minister has met with senior officials from the International Monetary Fund and has signalled that Jamaica’s long-running challenge of bringing its public debt under control will remain the central preoccupation of his administration. This is welcome news for the investment community, which has long regarded fiscal stabilisation as a prerequisite for a sustained improvement in Jamaica’s economic performance and credit standing.

Political observers across the Caribbean are watching the Jamaican situation closely. The Jamaica Labour Party’s parliamentary majority is narrow, and there is considerable speculation that the Prime Minister may call a general election before the constitutionally mandated deadline. Such speculation creates a degree of uncertainty in the investment climate, as potential buyers and developers of Jamaican real estate prefer to see political conditions clearly settled before committing significant capital. Nevertheless, the fundamental long-term attractiveness of Jamaica as a tourism and property investment destination remains intact, and most seasoned market participants are treating the current uncertainty as a temporary factor rather than a structural concern.

In the property market, Kingston’s commercial sector is seeing measured activity, with some transactions proceeding that had been held in abeyance during the months of uncertainty surrounding Golding’s departure. The north coast tourism corridor from Montego Bay to Ocho Rios remains the primary focus of international property interest, where branded residence and villa developments continue to attract enquiries from North American and regional buyers.

Holiday Season Outlook: The North American Lifeline

For the Caribbean hospitality and property sector, the November-to-April winter season is the commercial heartbeat of the year. This year, the industry enters the peak period with a mixture of cautious optimism and watchful concern. On the positive side, advance booking data from North American source markets — the United States and Canada — is tracking broadly in line with or slightly ahead of the comparable period in 2010. American consumers, while not immune to anxiety about their own economy, have demonstrated continued appetite for Caribbean winter escapes, and airlines serving the region have largely maintained their capacity commitments.

The European picture is more complicated. The ongoing Eurozone crisis — which has now engulfed Italy and Spain in addition to Greece, Portugal, and Ireland — has made European consumers more cautious about discretionary spending. Caribbean destinations with a heavy reliance on UK and continental European visitors are reporting that some traditional customers are deferring or downgrading their winter holiday plans. However, the region’s luxury segment appears to be holding up better, as high-net-worth European travellers remain largely insulated from the austerity pressures affecting middle-income households.

The property investment market reflects these patterns. Enquiries from European buyers of Caribbean real estate have moderated, with many citing a desire to wait for greater clarity on the Eurozone situation before proceeding with major purchases. Meanwhile, North American interest remains comparatively robust, particularly in well-established markets such as the Turks and Caicos Islands, the Bahamas, and Barbados’s Platinum Coast, where title security and USD pricing provide familiar comfort to American and Canadian buyers.

Dominican Republic: Regional Development Star

The Dominican Republic continues to distinguish itself as one of the Caribbean’s most dynamic tourism and investment markets. Hotel arrivals data through the third quarter of 2011 confirm that the DR has extended its lead as the region’s single largest tourism destination by visitor volume, with all-inclusive resorts in Punta Cana and Bavaro operating at strong occupancy levels. The government’s sustained investment in infrastructure — roads, telecommunications, and the expansion of Punta Cana International Airport — is paying dividends in terms of developer confidence and new project announcements.

Beyond the established Punta Cana corridor, the north coast is emerging as the next significant development frontier. The area around Puerto Plata, Las Terrenas, and the Samaná Peninsula is attracting boutique hotel developers and upmarket residential project proposals, targeting a more independent-traveller market than the all-inclusive model that dominates the eastern coast. For property investors willing to look beyond the immediate Punta Cana market, the north coast offers compelling price-to-value propositions in locations of considerable natural beauty.

Caribbean Leaders This Month

Andrew Holness, Prime Minister of Jamaica: Holness continues to project confidence and purpose in his first full month at the helm, but the political arithmetic of his parliamentary majority and the approaching electoral calendar dominate the background conversation among Kingston’s political and business classes.

Kamla Persad-Bissessar, Prime Minister of Trinidad and Tobago: T&T’s economic fundamentals remain among the strongest in the region, and Persad-Bissessar’s government is using the energy revenue windfall to press ahead with infrastructure projects that are generating employment and business activity across the twin-island republic.

Leonel Fernández, President of the Dominican Republic: The Fernández administration rounds out 2011 with a strong economic narrative, having overseen consistent growth in tourism and construction. The president’s pro-investment posture has been central to the DR’s emergence as the region’s most prolific destination for resort hotel development.

Freundel Stuart, Prime Minister of Barbados: Stuart is steering Barbados through fiscal pressures with a steady hand, though the island’s heavy dependence on British and European visitors is a source of concern as the Eurozone crisis deepens. The government has been working to expand airlift from North America to reduce this dependency.

Denzil Douglas, Prime Minister of St Kitts and Nevis: St Kitts’s citizenship by investment programme is generating a growing stream of applicants, with Asian and Middle Eastern interest notable. The associated real estate purchases are supporting an active development market on the island.

Perry Christie, Leader of the Progressive Liberal Party, Bahamas: Christie and the PLP are preparing for a general election expected in 2012, presenting a vigorous opposition to the incumbent Ingraham government. The Bahamian property market remains one of the Caribbean’s most internationally recognised, and political transition — when it comes — is unlikely to alter its fundamental attractiveness.

Baldwin Spencer, Prime Minister of Antigua and Barbuda: Antigua’s yacht charter and sailing tourism sectors are performing well heading into the season, and the island’s luxury hotel offerings continue to command top-tier rates from high-net-worth visitors from North America and the UK.

Roosevelt Skerrit, Prime Minister of Dominica: Dominica’s nature tourism appeal and its citizenship by investment programme are drawing increasing attention from global investors seeking a combination of an authentic Caribbean experience and a credible second-passport option.

Looking Ahead

Jamaica’s political landscape will dominate Caribbean news in the weeks ahead. With Prime Minister Holness having confirmed that a general election will be called before the end of the year, the island’s voters will soon be making a choice that will shape economic policy for the next parliamentary term. The investment community is watching carefully, as the outcome will have implications for Jamaica’s relationship with international financial institutions and its approach to fiscal reform.

On the Eurozone front, a European Union summit in Brussels has produced agreements on fiscal compact arrangements, but markets remain sceptical about whether the measures are sufficient to restore confidence in Italy and Spain. The Caribbean tourism industry will be monitoring European booking trends closely through December and into January, which will provide the clearest early read on whether the crisis is meaningfully affecting winter holiday decisions.

The Caribbean property market enters December with measured confidence. The winter rental season is performing solidly, new development announcements continue to emerge across the region, and international investor interest — particularly from North America — remains constructive. The next edition of the Caribbean Property and Investment Review will carry a full assessment of how the Christmas and New Year period has played out for the region’s hospitality sector.

The Caribbean Property & Investment Review is published monthly for property professionals, investors, and stakeholders across the Caribbean basin. Edition 176 covers the period 3 November to 2 December 2011.